A Sovereign Risk pool summit took place on October 5, 2023 in London, UK, to facilitate strategic engagement across representatives of the African Risk Capacity Ltd (ARC Ltd), the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) including Central America, the Pacific Catastrophe Risk Insurance Company (PCRIC), , and the Southeast Asia Disaster Risk Insurance Facility (SEADRIF). Together, the Sovereign Risk pools have been established to serve sovereign climate and disaster risk insurance objectives of nearly 100 nations globally. Securing access to financial resources before a disaster strikes through sovereign catastrophe risk pools allows countries to respond quickly to disasters and reduce their impact on people and their livelihoods. Through these regional facilities, countries can pool risks in a diversified portfolio, retain some of the risk through joint reserves, and transfer excess risk to the reinsurance and capital markets.
The Summit was co-organized with The Centre for Disaster Protection and Gallagher Re. It was attended by representatives of donors and development partners, that joined strategic discussions about disaster finance trends and gaps – to help inform how the Sovereign Risk Pools can collaborate to scale-up the availability of pre-arranged finance to serve disaster response needs. The cost of re/insurance in particular remains a challenge and was discussed extensively, with representatives of the industry. Lessons and best practices were shared, and joint approaches and enhanced collaboration further explored.
Risk Pool executives confirmed increasing cooperation under a joint Memorandum of Understanding signed in 2021 after the inaugural Risk Pool Summit. The MoU provides the platform to articulate joint principles defining development insurance programs, using pre-arranged finance to support country development objectives, including protecting vulnerable populations, strengthening financial resilience and promoting sustainable growth, including for the private sector.
The Pools agreed to explore increased capitalization, and more efficient use of reinsurance. They will also seek to expand collaboration in the areas of parametric model development, knowledge and data management, and shared human resources. They also agreed to further leverage meso- micro and replica schemes to complement sovereign risk transfer.
The Pools specifically confirmed a shared interest in exploring with donors and development partners the establishment of a joint reinsurance facility. This would promote more efficient use of capital, and facilitate global risk transfer access to reinsurance and capital markets, which are both critical to scaled-up, sustainable growth of risk pools’ insurance offerings to developing countries.
Ms. Hien Anh Than, Executive Director of SEADRIF Insurance Company said: “SEADRIF is committed to working closely with our partners in the global family of sovereign risk pools to strengthen financial protection against increasing climate risks. Collaboration – and where it makes sense joint solutions – will play an increasingly important role in these efforts.”
“We are pleased that the pools also agreed to collaborate more extensively to develop parametric models and to further explore meso- micro and replica schemes to complement sovereign-level risk transfer,” commented ARC Ltd. CEO Lesley Ndlovu. “This is our area of expertise, and where we can share knowledge and best practices.”
CEO Mr. Aholotu Palu said: “PCRIC is committed to enhancing the understanding of its services across the Pacific region. We strive to provide cost-effective, bespoke parametric insurance products and actively engage with other regional risk pools to gain valuable insights into the unique challenges they face. This collaborative approach then equips us with practical knowledge to develop impactful solutions for risk mitigation.”
Antoine Bavandi, Global Head of Public Sector & Climate Resilience Solutions practice at Gallagher Re said: “The role of sovereign risk pools is essential in closing the protection gap. As lead broker and risk advisor on this agenda, we are fully committed to supporting their sustainable growth plans with donors and development partners. The London summit was a critical milestone towards a more holistic and a more collaborative approach on climate and disaster risk finance. We look forward to structuring together practical solutions that allow economies of scale and a more cost-efficient use of reinsurance and third-party capital globally.”